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Internal Capital Markets, Forms Of Intragroup Transfers, And Dividend Policy: Evidence From Indian Corporates

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  • Elena Goldman
  • P. V. Viswanath

Abstract

Firms in a business group share ownership structures, allowing them access to sources of intragroup financing not available to independent firms. Resources could be transferred within a group either through intragroup transactions, primarily operational activities (internal transfers), or through dividends permitting insiders to make investments in other group firms (external transfers). The first strategy predicts lower dividends, and the second predicts the reverse. Using a large data set of listed Indian firms, we look at the costs of internal transfers versus external transfers and find that dividend policies of group firms are better explained by the external transfer hypothesis.

Suggested Citation

  • Elena Goldman & P. V. Viswanath, 2017. "Internal Capital Markets, Forms Of Intragroup Transfers, And Dividend Policy: Evidence From Indian Corporates," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 40(4), pages 567-610, December.
    • Handle: RePEc:bla:jfnres:v:40:y:2017:i:4:p:567-610
    DOI: 10.1111/jfir.12135
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    Cited by:

    1. Basu, Debarati & Sen, Kaustav, 2022. "Organizational form and access to capital: The role of regulatory interventions," Journal of Contemporary Accounting and Economics, Elsevier, vol. 18(3).
    2. Jindal, Varun & Seth, Rama, 2019. "A new order of financing investments: Evidence from acquisitions by India’s listed firms," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 307-328.
    3. Martina Sopta Mihaela Mikić Tin Horvatinović, 2019. "Dividend Policies and Business Groups: the Case of Croatia," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 22(SCI), pages 25-36, March.

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